Canadian Dollar Gains on Fading Rate Hike Bets and Tariff Pause

The Canadian Dollar has gained traction against the US Dollar due to fading expectations of a Fed rate hike. The USD/CAD pair declined to around 1.3790 during European trading hours on Thursday, with the US Dollar weakening against the Canadian Dollar.

Cooling US inflation figures have dampened aggressive Federal Reserve policy expectations, leading traders to anticipate a lower likelihood of a rate hike at the Fed's September meeting. According to the CME FedWatch tool, there is now only 32.7% odds of a rate hike compared to 47% just a month ago.

The announcement by US President Donald Trump that he will pause imposing new tariffs on Canadian goods for three days has also provided some relief to the Canadian Dollar. The trade deal between the two countries remains subject to final documents, but this temporary reprieve from escalating trade measures is seen as positive for the CAD.